The Bond King Kicks Off ’12 With a Bang

Renowned fund manager Bill Gross stemmed a spate of outflows from the world’s largest bond fund in January and then rewarded his new investors with a market-beating performance that could erase memories of his ill-timed bets against Treasury bonds last year.

The $250.5 billion Total Return Fund (PTTRX) that Gross manages at Pacific Investment Management Co. posted a net inflow of $230.6 million last month. That was the first monthly positive cash flow result in four months, according to data provided Monday by Syl Flood, product manager at mutual fund tracker Morningstar. It followed a $5 billion redemption in 2011, the first calendar year net outflow for the Total Return fund since its inception in 1987.

Meanwhile, Morningstar data also show that the fund handed investors a return of 2.44% this year through Feb. 3, beating the 0.45% on the Barclays Capital US Aggregate Bond Index. Over the past three months, the fund has handed investors a return of 3.16%, beating the benchmark index’s 1.18% and placing the fund in the top 3% among its peers.

In 2011, the fund posted a return of 4.16%, far below the 7.84% result for the benchmark index.

The fund has one of the most impressive long-term track records within the fund management community, as seen in the fact that it beats its benchmark over three-year, five-year, 10-year and 15-year periods. It had a return of 7.37% over the past 15 years, compared to 6.31% on the benchmark, data from Morningstar showed.

There are still 11 months to go for Gross, but the fund’s recovery does support a common view that 2011′s lackluster ride was a temporary blip for a fund manager that many perceive as the Warren Buffett of the bond market.

“He made some bad bets on Treasurys and he fixed it,” said Tom Roseen, research analyst at Lipper. “He certainly is turning the ship around. Now his Treasury position is properly placed and he has been very nimble in picking high-quality emerging market and corporate bond debt.”

Gross didn’t immediately respond to questions Monday on the fund’s flow and performances.

Gross recently had a change of heart toward the Treasury bond market, switching to positions that pay off if the Federal Reserve’s easy monetary policy keeps bond yields relatively low, even if it doesn’t push them down. Bond yields move inversely to their price.

“Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside,” said Gross in his February investment outlook.

Gross has been loading up Treasury bonds in recent months and the latest data showed that the share of Treasury bonds in the fund has risen to 30% in December, up from 23% in November and 19% in October.

Gross also lifted holdings of mortgage-backed securities to 48% from 43% in November and 38% in both October and September, a bet on potentially more stimulus from the central bank via MBS purchases.

Comments (2 of 2)

Even though a sequel for "The Muppets" has been greenlit, one particular star who was integral to bringing the franchise into the new millennium won't be a portion of it, reports Collider.
Jason Segel told the web site he will not be signing up for an additional round with Kermit and Co. "It's true [that I won't be within the sequel]," stated Segel, "but it is entirely amicable. My objective was to bring the Muppets back and I did that, leaving them in quite great hands." Segel mentioned he wants "to pursue far more human-related projects," adding, "All I wanted to do was to set the stage for them to complete whatever they wanted. I'm sure I'll return in some capacity here and there, but that was half a decade of my life. 5 years of difficult work. I am prepared for a little puppet break."

9:31 pm February 6, 2012

Ray Rez wrote :

Things will change
After the Nov election
Expect bond yield to rise with inflation
Then BUY TMV 3x bond bear

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